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TMI Blog2021 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ar of write back despite the fact that it =was disallowed under section 40(a)(ia) of the Income-tax Act, 1961 ("the Act") in earlier years. 2. Without prejudice to the above, the learned CIT(A) erred in not appreciating the fact that the amount, if any, added back in computation of total income, will increase the business profit and consequently, would enhance the deduction under section 10A of the Act and also, erred in alleging that, on the basis of records available and furnished by the appellant, it is not possible to ascertain allowability of deduction under section 10A of the Act on disallowance made, even though, the learned AO mentioned that said excess provision written back is pertaining to business under section IDA of the Act in the assessment order passed under section 143(3) read with section 148 of the Act. 3. That the learned CIT(A) erred in upholding the action of the learned AO of initiating the penalty proceedings under section 271(1)(c) of the Act." 3. The assessee has filed additional grounds as follows:- "4. That the learned CIT(A) ought to have held the reassessment order as invalid for the reasons that a) neither the reasons recorded nor the reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Later, assessment was reopened by recording reasons for reopening as follows:- "The assessment of M/s. Textron India Pvt. Ltd. for the assessment year 2008-09 was concluded u/s. 143(3) on 24.01.2012 by determining the taxable income at Rs. 4,99,32,447/- after allowing 10A deduction of Rs. 9,11,55,684 against the claim of the assessee at Rs. 3,80,63,535 and a taxable income of Rs. 1,13,05,420. 2. Subsequently it is noticed that the assessee had credited in the profit & loss account an amount of Rs. 1,63,00,116 as excess provision of earlier years written back, which was not reduced in the computation of income resulting in excess claim of 10A deduction on the enhanced profit. The resultant excess claim of 10A deduction. If you have any objections for reasons to reopen the assessment you are here by requested to file objections before 04/07/2014 in this Office. If your reply does not reach this office before 04/07/2014 it is presumed that you have no objections for the reasons for reopening the case and assessment will be concluded accordingly." 9. Consequently notice u/s. 148 was issued to the assessee on 11.2.2014. 10. Now the contention of the ld. AR is that AO has reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure of the appellant to disclose any material fact. - Andhra Bank Ltd. v. CIT [1997] 92 Taxman 534 (SC) - CIT v. Vijaya Bank [2005] 149 Taxman 674 (Kar) In these decisions, it was held that reassessment order essentially is a review order in the garb of reassessment on account of change of opinion. - PCIT V. Century Textiles & Industries Ltd. [2018] 99 taxmann.com 206 (SC) SLP Dismissed. [2018] 99 taxmann.com 205 (Bom) It was held that quantum of deduction already examined under assessment order, cannot be re-examined in reassessment order. 12. On the other hand, the ld. DR submitted that reopening of assessment was done by the AO correctly after it came to his knowledge that assessee credit in the P & L account an amount of Rs. 1,63,00,116 as excess provision of earlier years written back which was not reduced in the computation of income resulting in excess claim of 10A deduction on the enhanced profit. The resultant excess claim of 10A deduction is to be collected. Therefore AO reopened the assessment by recording the reasons as such. He supported the order of lower authorities. 13. We have heard both the parties and perused the material on record. We have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o element of lack of true and full disclosure on the part of the assessee, which resulted into any income chargeable to tax escaping assessment. The reasons clearly reveal that the Assessing Officer was proceeding on the material which was already on record. In the absence of the statutory requirement of income chargeable to tax have been escaped assessment due to the failure on the part of the assessee to disclose truly and fully all material facts been satisfied, the Tribunal correctly held that the notice of reopening of assessment was invalid". 17. The Hon'ble Karnataka High Court in the case of CIT v. Karnataka Bank [(2014) 52 taxmann.com 526 (Karnataka)] had held that when there is no case of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and further, where the Assessing Authority applied its mind and being satisfied with the claim, allowed the case of the assessee, the Assessing Authority could not have initiated proceedings u/s. 147 of the Act, after the end of 4 years. 18. The Hon'ble Madras High Court in the case of Sri Shakthi Textiles Ltd. v. JCIT [(193 Taxman 216 (Madras)] had held that indication o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the absence of spelling out that the escapement of income was due to the fact that the assessee has not disclosed truly and fully all material facts necessary for completion of assessment, in the reasons recorded, would be a valid reopening. Noticing that the ITAT, Bangalore Bench had quashed the assessment holding that the re-opening of the assessment was invalid, on this count, the jurisdictional High Court upheld the aforesaid order of the ITAT in para [23] by observing as follows: "23. We are also of the view that initiation of reassessment proceedings will have to be held as invalid for the reason that reasons recorded by the AO do not spell out that escapement of income was due to the assessee not fully and truly disclosing all material facts necessary for completion of assessment for the relevant assessment year. In this record, we are also of the view that all legal toys in para 19 of the reasons recorded do not spell out the belief that there was a failure on the part of the assessee to fully and truly disclose all material facts. In fact, the assessee had disclosed all facts in the original assessment proceedings u/s. 43[3] of the Act". 22. In the case of Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income - tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is token the requirements of law should be satisfied". 24. The Apex Court in the case of Kelvinator of India Ltd. (320 ITR 561) (SC) held in para 4 as under:- "4. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in reopening the case. (iv) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (v) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied - a post mortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (vi) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vii) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something ITA No. 205/Bang/2020 therein, which is critical to the formation of the belief must be referred to. Otherwise, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght. There is no ban or any legal embargo under Section ITA No. 205/Bang/2020 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xiv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a "bona fide" belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. (xv) The concept of "change of opinion" has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. (xvi) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assessee's profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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